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ZaZa Energy is emphasizing its assets in the Eaglebine with a joint venture with EOG Resources; the company is selling some of its assets in the Eagle Ford. (ZaZa photo)

By Jeremy RoebuckSan Antonio Express-News

AUSTIN – If South Texas’ oil-producing counties thought this was the year they finally would tap deep reserves of state funding for the crumbling roads, lack of housing and increased water demands brought on by their energy boom, they might want to think again.

Oil and gas production taxes from areas like the Eagle Ford Shale have pumped billions into state coffers in the past two years. But as legislators carve into this year’s projected $8.8 billion surplus, debate has grown increasingly fraught over what Texas owes counties at the center of the energy explosion.

Local lawmakers argue their districts have endured all the costs. But after a lean 2011 legislative session that saw deep cuts to public education and social services, those from other parts of the state are eyeing the oil windfall like eager heirs squabbling over a hefty bequest.

Facing a fight that pits the needs of a few counties against those of the state as a whole, DeWitt County Judge Daryl Fowler worries no clear solution will emerge before the current session ends in May.

“There’s no free lunch in Austin,” Fowler said while driving home from a Capitol lobbying trip last week, along roads pockmarked by daily heavy-truck traffic. “Someone’s paying for the damage. Someone else is reaping all the gain.”

Signs of new wells appear all along the largely rural stretch, which spans roughly from Leon County, outside Houston in the northeast, to Webb County in the southwest.

During the last two years, the number of oil-producing wells has increased more than 15-fold. Drilling permits are up more than 300 percent.

And with each new well, the state gets its cut. Natural gas producers paid $2.6 billion in state taxes during the last two-year budget cycle – up nearly 42 percent from the years before. Meanwhile, oil-production tax revenue rose nearly 80 percent to $4.4 billion.

All that, said Comptroller Susan Combs in delivering her financial forecast at the start of the year, has contributed to an $8.8 billion budget surplus and the $11.8 billion she projected for the state’s Rainy Day Fund by 2015.

Local counties like DeWitt also have reaped rewards in the form of increased revenue from property, hotel-motel and overweight axle taxes. Their new wealth has come at a cost.

Roads are crumbling under the stress of daily truck traffic hauling in heavy equipment in and hauling out oil and gas.

With some DeWitt County roads becoming all but impassable, school buses have shifted their routes and asked parents to drop off their kids along busy state highways, Fowler said.

Hordes of roughnecks descending to work the fields have snatched up available housing in neighboring Karnes County. And with more drivers and commercial vehicles on the roads, traffic fatalities have more than quadrupled over the past five years.

All across the 25-county shale play, concerns about water use at drilling sites and demands on public health and schools continue, said state Sen. Judith Zaffirini, D-Laredo, whose district covers 12 Eagle Ford counties.

“There are almost too many issues to address,” she said. “Housing, transportation, safety they’re all top priorities – every single one of them.”

Competing demands

Still, legislators representing the region entered this year’s session optimistic they would find solutions. So far, they have filed bills to address traffic safety issues, road repair and public health concerns.

A constitutional amendment backed by state Rep. Ryan Guillen, D-Rio Grande City, would allow local governments to form shale transportation districts, capable of issuing bonds for road maintenance.

Another, put forth by state Rep. Jim Keffer, R-Eastland, chairman of the House Energy Resources Committee, would inject $1.4 billion into a fund for energy-related road repair.

Hoping to avoid fights with the state’s powerful energy lobby over new taxes, many of the proposals suggest tapping the state’s rainy day fund, an emergency spending account composed mainly of revenue already paid in oil and gas production taxes.

But while the area’s legislators say state House and Senate leadership appears sympathetic to their needs, those holding the purse strings have indicated they plan to keep spending down and face a Capitol full of legislators with their hands out.

Proposals already have been floated to use some of the state’s surplus to pay back the $5.4 billion cut from public education budgets in 2011. Last week, Gov. Rick Perry approved a plan to use $4.5 billion to pay off the state’s unpaid Medicaid bill.

“There are advocates for other uses, too, like water,” said Steve Holzheauser, an Austin lobbyist hired by a collective of Eagle Ford counties. “And everyone is making plausible and aggressive arguments.”

Though many of the bills proposed to benefit the Eagle Ford region would apply to all the state’s energy producing counties, some legislators from declining shale plays, like the Barnett in North Texas, bristle at the possibility that South Texas might receive help their counties asked for and didn’t receive when their energy production was at its height.

“I had one lawmaker say to me, ‘We paid for our problems on our own. Why should the Eagle Ford Shale get special attention?’?” Zaffirini said.

A united push

With 10 weeks to go before the end of the legislative session, Eagle Ford legislators have launched a coordinated effort to brand their districts’ needs as a statewide problem.

“We don’t want two years to go down the road because we’ve missed the opportunity to start the ball rolling,” said Keffer, the state House energy committee chairman.

Earlier this year, Zaffirini rallied a group of 27 state senators and representatives to form the Eagle Ford Shale Legislative Caucus, in hopes of creating a united front.

Back home, lawmakers are urging the oil and gas industry to promote the jobs and money the South Texas oil boom has brought to other parts of the state.

“A lot of my colleagues hear about the Eagle Ford Shale. But they don’t come down here. They don’t see it,” state Rep. Poncho Nevárez, D-Eagle Pass, told a roomful of oil and gas executives, lawmakers and local residents at the recent Eagle Ford Consortium Conference in San Antonio.

Sources involved in the state’s ongoing budget negotiations say those efforts appear to have had some effect. A one-time disbursement of state cash to repair existing damage on Eagle Ford roadways appears increasingly likely, they said.

However, prospects for a longer-term solution for road maintenance and any of the region’s other myriad issues remain less clear.

After two years that have brought both explosive growth and extensive need to her hometown, Karnes County Judge Barbara Shaw isn’t ready to get her hopes up yet.

“All this talk about emergency spending and the Rainy Day Fund,” she said. “Well, it’s been pouring here for two years, and all we’ve got so far is a giant puddle of mud.”

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